Growth and stability critical for manufacturing transformation

Economic and national security will largely rely, not just on our ability to compete globally, but also on self-reliance and resilience in manufacturing.

Joe North, chief executive of Lockheed Martin Australia.

The economic impact of Covid-19, coupled with the need to improve Australia’s self-reliance, has made the digital transformation of Australia’s manufacturing sector a national strategic imperative.

However, for many manufacturing businesses, the demands of navigating the operational realities of a pandemic while fulfilling their obligations to customers leaves less capacity, let alone capital, for pursuing such initiatives.

This is where primes, as lead capability partners to Australian industry, have a responsibility to support and, ultimately, accelerate that transformation.

When it was first coined, Industry 4.0 (i4.0) imagined a brighter industrial future through the application of digital technologies and data analytics to manufacturing systems and processes.

Australia charted a course for the i4.0 promised land of greater connectivity, agility and efficiency in the hope of making our manufacturers more innovative and, therefore, more globally competitive.

Large-scale traditional manufacturing made way for the emerging small-to-medium enterprise (SME)-sized advanced manufacturers for whom digitalisation could be more readily propagated.

An i4.0 ecosystem was established to drive the transformation, including the Innovative Manufacturing CRC (IMCRC), the Ai Group-convened Industry 4.0 Advanced Manufacturing Forum and its precursor the Prime Minister’s Industry 4.0 Taskforce.

While these bodies and initiatives have been instrumental in realising positive, demonstrable progress, there is still some way to go before Australia’s manufacturing base can be broadly characterised as i4.0 capable.

The shifting sands of Australia’s regional geopolitical context combined with the economic impact of the Covid-19 pandemic has brought the extent of that i4.0 capability gap into sharp focus.

Thankfully, Australia has not sat idly by and let these external events shape its destiny.

Australia’s policy response to Covid-19 has included a significant macroeconomic pivot, not least of which being the advent of a $1.5bn national manufacturing strategy.

Meanwhile, the $270bn of investment to modernise the Australian Defence Force and prioritise sovereign industrial capabilities in support of the 2020 Defence Strategy Update remains no less salient.

The cumulative result is that the security of our economic and national interests will largely rely, not just on our ability to innovate and compete globally, but on the extent we are able to entrench a greater degree of self-reliance and resilience within our manufacturing industry base.

Our collective mindset as an industry must therefore be focused on i4.0 transformation rather than incremental digital change and primes have a responsibility to support Australian SME industry partners on that journey.

Lockheed Martin has a team dedicated to researching local “best of breed” industry capabilities, matching them with identified business opportunities in our Global Supply Chains and supporting them to be world class.

Often those partners require nurturing through the process of identifying, integrating and then optimising i4.0 technologies within their businesses.

The impact of those i4.0 technologies in accelerating our industry partners’ capabilities is truly transformational.

A good example of our i4.0 capability stewardship in action is our approach to advancing the delivery of an Australian guided weapons manufacturing capability in support of a sovereign national guided weapons enterprise.

Our teaming agreement with Thales Australia underpins our commitment to co-operate in the design, development and production of Lockheed Martin’s Long Range Anti-Ship Missile – Surface Launch (LRASM SL) variant, with a specific focus on booster and rocket motor technologies.

This will represent a step change for future weapons manufacture in Australia – through the transfer of advanced technologies and R&D investment we see the opportunity to drive the creation of a skilled local workforce, build resiliency in supply chains and help secure Australia’s sovereign defence capabilities for now and into the future.

And with the emergence of hypersonics, the innovation potential for this world-class sovereign capability is limitless.

The other fundamental impediment we must work to overcome together in strengthening the self-reliance of Australia’s manufacturing industry is its make-up.

The sector’s heavy skew towards small businesses is well documented, and the inherent challenges this represents for realising a robust, digitalised manufacturing sector are well understood.

Where possible, primes have a responsibility to support a reorientation of the sector by encouraging growth in the proportion of medium-sized manufacturers.

In many ways, this commitment goes beyond the standard Australian Industry Capability approach of working with SME partners to adopt advanced technologies.

At Lockheed Martin Australia, we identify and facilitate opportunities for collaboration partnerships between local manufacturers with complementary capabilities.

Supporting industry partners to adapt and increase scale, such as to enable the creation of new subsystems instead of single parts, also raises the potential for greater adoption of i4.0 technologies and, ultimately, further innovation.

While this approach is a driver of greater self-reliance, it is leveraging that transformation as a competitive advantage that will ultimately improve our resilience.

Covid has also demonstrated that regional supply chains are easier to manage and quicker to recover, increasing the importance of the Indo-Pacific as a target market.

Lest we forget Australia has proven its ability to perform as a regional centre of excellence for leading-edge industry capabilities, not least in the support of the global F-35 sustainment program.

The convergence of a global pandemic with the growing importance of stability in the Indo-Pacific has thrust Australia’s need for greater self-reliance and resilience on to the national agenda and i4.0 will be critical to achieving these objectives.

If Australia is to transform its manufacturing base we each have a responsibility to work to accelerate and advance the capabilities of the national manufacturing priority sectors we operate in.

Whether primes or SMEs, we must be united in our ambition that growth and stability, as a result of Australia’s steadfast commitment to the acceleration of its advanced defence and industrial capabilities, will prove to be one of this period’s most enduring legacies.

Joe North is chief executive of Lockheed Martin Australia.